Late in 2016, the U.S. Department of Labor (DOL) filed an appeal with the 5th Circuit Court of Appeals seeking to overturn a preliminary injunction that stopped salary changes in the Federal Labor Standards Act’s (FLSA’s) overtime exemptions from going into effect. The new changes were set to go into effect on December 1, 2016. The Fifth Circuit Court of Appeals granted the delay, and briefing is now due in May.
Proposed Overtime Rule
The DOL published historic changes to the overtime rule that makes about 4.2 million currently exempt employees eligible for overtime pay. The FLSA rule determines whether or not employees are eligible for overtime pay. The DOL received more than 270,000 comments in response to its 2015 notice of the proposed rule, many of which helped shaped the final rule.
The final rule primarily focuses on updating salary and compensation levels for Executive, Administrative, and Professional workers to meet exemption. Specifically:
- Changes the standard level salary to $47,476 annually ($913 weekly) for a full-year workers;
- Highly compensated workers are now subject to a minimal duties test and the compensation required is set to $134,004;
- Automatically updates the salary and compensation levels every three years; and
- Amends the salary basis test to allow employers to use non discretionary bonuses and incentive payments (including commission) to satisfy up to 10% of the new salary level.
Prior FLSA Overtime Rule
Prior to the proposed changes, the standard salary level was $23,660 per year (or $455 weekly).
In 1975, 62% of full-time salaried workers were eligible for overtime pay; now that number is only 8%.
To qualify for the exemption, an employee must meet the following three requirements:
- He or she must be paid a predetermined and fixed salary not subject to reduction because of variations in the quality or quantity of work performed (the “salary basis test”);
- The amount of salary paid must meet a minimum specified amount (the “salary level test”); and
- His or her job duties must primarily involve executive, administrative, or professional duties as defined by the regulations (the “duties test”).
The last time the salary was updated was in 2004. Future automatic pay updates will begin on January 1, 2020.
Federal Government Granted Delay
After the current Trump administration took over the federal government, including the DOL, on January 20th many expected a more employer-friendly approach regarding the rule changes. Not surprisingly, the federal government has requested another delay to allow the new administration as well as soon-to-be DOL Secretary Alexander Acosta to review the changes and develop a legal strategy.
The court granted the government’s request and the injunction is expressly nationwide in scope, according to a report by the National Law Review.
Contact a Labor Attorney
If you are an employer and have questions about the upcoming changes in the FLSA, contact a knowledgeable employment law attorney to ensure you are complying with federal law. If you are an employee and want to learn more about your rights under the proposed FLSA to make sure you are being treated fairly, consult with a knowledgeable employment law attorney who ca explain the law to you in simple terms.